Mortgage rates reversed last weekby Tim Manni
Below is the latest edition of our Market Trends newsletter, a weekly examination of the economic conditions that influenced mortgage rates. Sign up to receive the Market Trends in your email Friday evening.
We notched a small decline in mortgage rates last week, taking back a little of the increase of the past couple of weeks.
Mortgage rates have been largely floundering around the bottom for several months, with not enough bad economic news or fear to drive them lower and just some cautious optimism to nudge them upward. A period of warmer economic data from the end of 2012 has moved them off bottoms, but there seems nothing in place to keep them moving upward.
Mortgage rates back down
HSH.com’s broad-market mortgage tracker–our weekly Fixed-Rate Mortgage Indicator (FRMI)–found that the overall average rate for 30-year fixed-rate mortgages (conforming, non-conforming and jumbo) declined by six basis points (0.06 percent) to 3.67 percent.
The overall average rate for 15-year fixed-rate mortgages (conforming, non-conforming and jumbo) decreased by just two basis points, easing the popular refinance product to an average rate of 2.97 percent for the week.
FHA-backed 30-year fixed-rate mortgages rose by one hundredth of a percentage point (0.01 percent), moving back to 3.32 percent, as inexpensive mortgage money remains readily available to credit- or equity-impaired borrowers. Also, the overall average rate for 5/1 Hybrid ARMs slipped by two basis points, ticking down to 3.69 percent.
Housing holding at a strong pace
Housing is gaining or holding a relatively strong pace, at least compared to that of the past few years. The National Association of Home Builders measure of member sentiment sported a reading of 47 for January, the same value as seen in December, itself the best in many years.
The sub-gauge of single-family sales held at 51 and expected activity for the next six months shed a tick to 49, but traffic at showrooms and model homes gained one spot to 37. For the most part, the report detailed a new home market which has largely recovered from the depths of the recession.
Housing starts have recovered, too. Construction of new homes was initiated on an annualized 954,000 units in December, a pace some 12.1 percent above November, and a rate nearly double that seen in February 2011, one of the low points for starts. Single-family starts ticked up to a 616,000 annual pace (+8.1 percent over November), and multi-family to a 338,000 one (+20.3 percent). There was also optimism expressed about the future, too as building permits nudged 3,000 units higher to 903,000. That should portend well for construction as we move into spring and summer, provided no economic hiccup should occur.
Mortgage rates remain fantastic
Mortgage rates have lifted off absolute bottoms over the past couple of weeks. With the economy holding at a fair pace, probably a GDP of 2.2 percent or thereabouts for the fourth quarter and now, and with the automatic spending cuts and debt ceiling issues not yet derailing the economy, there’s no reason for them to revisit those pre-holiday depths.
However, better though the economy may be, it continues to be held there by extraordinary monetary policy, and there are plenty of dark clouds about which could filter or diminish the sunlight at virtually any time.
Still, there are plenty of reasons for optimism, more now than perhaps at any time over the past couple of years. Important drivers of the economy–housing markets, retail sales, automobile sales, for example–are all moving at an improved pace relative to where they had been. That interest rates have risen by a slight bit off absolute rock bottoms is in itself an expression of optimism, as investors are more confident about putting their capital at risk and at work in the broader economy, rather than stuffing it in a metaphoric mattress.
Mortgage rates dipped a little last week but seem likely to tick back upward a little this week, perhaps by the same amount.